J&J Said to Face Demand to Raise Risperdal Settlement Offer

The U.S. government has been investigating Risperdal sales practices since 2004, including allegations the company marketed the drug for unapproved uses, Johnson &Johnson has said in Securities and Exchange Commission filings. The company said it has been in negotiations with the U.S. to settle the investigation. Photographer: JB Reed/Bloomberg

March 12 (Bloomberg) -- Johnson & Johnson faces a U.S.
government demand to raise its offer by $800 million from an
initial proposal to settle a federal civil investigation into
marketing of the antipsychotic Risperdal, according to three
people familiar with the matter.

The Justice Department is demanding that J&J pay about
$1.8 billion to resolve the civil claims by the U.S. and some
states, the people said. The company raised its offer to settle
the civil investigation to $1.3 billion by March 8, and
negotiations on a final amount are continuing, one person said.

The demand came after the Justice Department and states
decided that a $1 billion settlement that had been negotiated by
the U.S. Attorney’s Office in Philadelphia in late December
wasn’t adequate, according to the people, who weren’t authorized
to speak on the matter.

A $158 million settlement between J&J and the Texas
attorney general during a trial over Risperdal marketing in that
state increased the demands by other states and the Justice
Department, one of the people said. Several states wanted more
money because of the Texas agreement, the person said.

The U.S. government has been investigating Risperdal sales
practices since 2004, including allegations the company marketed
the drug for unapproved uses, J&J has said in Securities and
Exchange Commission filings. The company said it has been in
negotiations with the U.S. to settle the investigation.

Criminal Charge

J&J, based in New Brunswick, New Jersey, disclosed in
August that it reached an agreement to settle a misdemeanor
criminal charge related to Risperdal marketing. The company had
been discussing paying about $400 million more to settle that
portion of the investigation, a person familiar with the
negotiations said.

A J&J spokeswoman, Carol Goodrich, declined to comment.

The Justice Department expects to announce an accord in
May, said one person. The department typically announces civil
and criminal resolutions at the same time in corporate cases.

The number of states that will join the final agreement
remains in flux, one person said. Each state can decide whether
to join the federal government’s settlement or pursue its own
case.

“Considering how much money the State of Texas got, it
makes sense for the DOJ to push back for a significantly higher
number,” said Patrick Burns of the advocacy group Taxpayers
Against Fraud. “Washington can do the math.”

Philadelphia Accord

The Wall Street Journal reported March 9 the Justice
Department had rejected the $1 billion settlement negotiated by
the U.S. Attorney’s Office in Philadelphia, citing unidentified
sources.

The U.S. Food and Drug Administration approved Risperdal in
1993 for psychotic disorders including schizophrenia. That
market is limited, and J&J’s Janssen unit sought to sell
Risperdal for bipolar disorder, dementia, mood and anxiety
disorders and other unapproved uses, according to documents in a
lawsuit against J&J by the state of Louisiana. It was later
approved for other uses.

Company officials said in an SEC filing in May that they
had reserved funds to resolve the government’s claims over
Risperdal marketing. The company didn’t say how much had been
set aside. The drugmaker said in an August filing it added an
unspecified amount to the reserve to cover criminal penalties.

12 State Suits

J&J and Janssen have been sued by 12 states, including
Texas, South Carolina and Louisiana, over Risperdal marketing.
The attorneys general of the other states “have indicated a
potential interest in pursuing similar litigation against”
Janssen, J&J said in its quarterly SEC filing in November.

J&J settled the claims by Texas for $158 million during
trial in January.

A jury in Louisiana, weighing claims that the company
downplayed the drug’s risks, awarded that state $257.7 million
in 2010. A South Carolina judge last year ordered J&J to pay
$327 million over Risperdal sold in the state.

Risperdal is a member of a class of drugs, known as
atypical antipsychotics, that includes Indianapolis-based Eli
Lilly & Co.’s Zyprexa and London-based AstraZeneca Plc’s
Seroquel.

Lilly, AstraZeneca and two other J&J competitors making
these drugs have paid $2.7 billion to resolve government
marketing claims, particularly that the companies pushed the
drugs for unapproved uses.

Lilly paid more than $1.7 billion to resolve state and
federal investigations over Zyprexa and AstraZeneca has paid
almost $590 million. Pfizer Inc. paid $301 million for its drug
Geodon.